Today, the decision of choosing a computer system among the available solutions, such as systems for enterprise resource planning, is often driven by two major questions: “What value does a certain solution have to our organization”? and “What must we invest to get that value?”. Attempting to answer the second question often involves performing a total cost of ownership (TCO) analysis. Models that help structure and analyze TCO have been developed by system manufacturers, such as SAP AG, and also by third parties, such as the Gartner Group.
Structures of costs depend on a myriad of solution characteristics. However, the key cost clusters usually common to all models are: investments in hard- and software, implementation, operations, update and further improvements of the solution.
The purchase decision for the customer is usually driven by a return-on-investment (ROI) analysis, which in turn depends on TCO. Organizations deploying and using an enterprise software product suite for an enterprise resource planning system (ERP), for example, strive to optimize and decrease their spendings for owning, supporting and operating the product.